The balance sheet remains rock solid (40 m€ cash, 0 debt).
Working capital requirement shows a marked increase (large increase in accounts receivable) but I see not cause for concern.

In my previous article I had mentionned that GEA was not part of the "Ecomouv" consortium implementing a new tax for trucks ; but according the the latest report GEA will be a supplier after all.

I had also mentionned that Sanef had bought the transport branch of Communication and Systems (CS group), a comparable company. Finally the branch has been sold for 15 m€, around 0.5x 2012 Sales, or 10x 2011 operational result.

"1. In the first half of the prior decade, GEA was operating with under 1.5 million in PP&E but generating half the revenues that is now. The return on net tangible assets was low (~4%) and that, too, was a mystery: a business in that line of work, i.e. specialized equipment, facing that industry structure, with the relationships that it enjoys, should be earning circa 30% to 40% returns on net operating assets.

2. In the second half of the decade, revenue grows by a factor of 1.5x, the margins expand by 100 bps, and, given that one doesn't need to build another factory to churn out approx 20% more units (20% volume x 10% expansion in gross margin = 50% increase in revenue,the fixed assets now turn over 43x rather than 23x -- that's operating leverage.

3. So, the real curiosity is not about the second half of the decade, but the first half.

Asset turns at 23x suggests a low volume, high value product. The cost of equipping a lane for dual manual/automatic electronic toll collection is circa EUR 80K (see here: http://ntl.bts.gov/lib/jpodocs/repts_te/7223.pdf , for example), and that suggests the manufacture & sale of about 440 units per year.

Can one or two machines a day be manufactured in a space valued at EUR1.5m, net of depreciation? I think so. (As an aside, low volume, high value may also explain the high carrying cost of the inventory; the inventory is 4x the PP&E).

4. So, if the first half of the decade can be explained in that way, then understanding the second half is not too problematic: instead of 440 machines, its 520. Same space, faster production process. Faster selling cycle so that inventory rises at a slower rate than revenues. Margins improve, services increase, and it all adds up to a plausible plot."